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Attention: Contractors Who Lease or Rent Construction Equipment and Suppliers Who Rent or Lease Construction Equipment

Please Disseminate to your Controllers
and Billing Departments


As a result of S.F. 413 more types of items and equipment rented or leased are exempt from the imposition of sales tax. Last year we encountered some problems regarding the streamlined sales tax law and its definitions as they applied to leasing and rental of construction equipment.

This year the legislature working with the Iowa Department of Revenue expanded the definition to get the back to the number of items exempt previous to the adoption of streamlined sales tax.

The definition now reads:
“All machinery, equipment, and replacement parts directly and primarily used by owners, contractors, subcontractors, and builders for new construction, reconstruction, alteration, expansion, or machinery, equipment, and replacement parts which improve the performance, safety, operation, or efficiency of the machinery, equipment, and replacement parts so used.”

What are specific of what this means:
Applies to rentals or leases only after July 1, 2005.
In order for an item to be exempt it must (like previous law) have had the sales tax paid on it when the supplier originally bought it prior to being put into inventory.
Examples of items that were not exempt that are now are the leasing and renting of compressors, drill presses, forms, tools and hand tools, lathes, storage or business office trailers, portable toilets, signing, fencing, barricades, self-propelled building equipment, self-constructed cranes, pile drivers, structural concrete forms, regulator and motorized scaffolding, generators, attachments customarily drawn or attached to self-propelled building equipment, auxiliary attachments, and replacement parts. These are merely examples of exempt items. Others may apply if they fit the definition previously stated.
Contractors should review rental and leasing billings for items rented or leased after July 1, 2005.
Suppliers should refund taxes paid by contractors if they were applied to items covered that were rented or leased after July 1, 2005.
Remember this exemption only applies to sales taxes on rented or leased items.

 

Specific questions should not be addressed to AGC/I, but rather to
the Iowa Department of Revenue and Finance Taxpayers Services at 1-800-367-3388 or go to the website www.state.ia.us/tax and look for the link for you to e-mail tax questions. Users of e-mail service have responded very positively regarding its use.

 



The Associated General Contractors of Iowa
701 East Court Avenue, Suite B -- Des Moines, IA 50309
phone: 515-283-2424 fax: 515-244-6289
email: kclark@agcia.org

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